On the non-optimality of free markets.

[mickanomics]

Dear GOD,

Don’t worry, I won’t stress about paying $10 too much for my mobile phone, especially now that I have heard from god himself that the free market was $10 sub-optimal, confirming my theory all along [:)]

[Esuric]

@mickanomics

So the less intelligent in our society can get ripped off mercilessly.

The fact that he bought it implies he wasn’t “ripped off.” Just because he could have gotten a __bette__r deal elsewhere doesn’t mean he didn’t get a “good deal.” Exchange requires that both parties value the alternative good/service more than the one they currently own. By the way, your rhetoric here is absurd.

@mickanomics

I want the government to help me a little by making laws that reduce the small-print surprises.

We all want help, it makes our lives easier. Unfortunately, the government can only help you at the expense of someone else. I would like the government to steal my neighbors Ferrari and give it to me, but that would be wrong.

[mickanomics]

@Esuric

Exchange requires that both parties value the alternative good/service more than the one they currently own.

Wrong. Exchange requires that both parties think they will benefit more from the alternative good/service more than the one they currently own. If one side makes a mistake in his estimation then it may be a bad exchange that he later regrets. Smoke and mirrors etc. makes mistakes more likely.

@Esuric

Unfortunately, the government can only help you at the expense of someone else.

That sounds like an argument for not having a government at all. Is that what you want?

[MatthewF]

@mickanomics

Dear GOD,

Don’t worry, I won’t stress about paying $10 too much for my mobile phone, especially now that I have heard from god himself that the free market was $10 sub-optimal, confirming my theory all along

Fair play. But seriously, you didn’t pay “too much” for your phone. The only way of determining if the cost (to you) measured in time, money, effort, etc was too much is to see if you purchased it or not. Since you indeed purchased, we now know that the phone was worth more (to you) than the time, money, effort, etc you traded for it.

[Esuric]

@mickanomics

Wrong. Exchange requires that both parties think they will benefit more from the alternative good/service more than the one they currently own.

What’s the difference? Value is purely subjective: If I think an apple will satisfy my hunger I’ll buy it, I may be wrong, but that’s life. Nothing has any intrinsic value whatsoever, value arises from preferences and desires. Thinking that this apple is worth more than $2 makes it worth more than $2, at least in my eyes (but this may change). Do you want to eliminate human error? Do you think this is possible?

@mickanomics

That sounds like an argument for not having a government at all. Is that what you want?

Yes.

[mickanomics]

@MatthewF

But seriously, you didn’t pay “too much” for your phone. The only way of determining if the cost (to you) measured in time, money, effort, etc was too much is to see if you purchased it or not. Since you indeed purchased, we now know that the phone was worth more (to you) than the time, money, effort, etc you traded for it.

Subject to the the insertion of the word “think” (see my previous post) I entirely agree, but I don’t see that this contradicts anything I have said does it?

[mickanomics]

@Esuric

Do you want to eliminate human error? Do you think this is possible?

I’m only suggesting we attempt to reduce human error.

@Esuric

@mickanomics

That sounds like an argument for not having a government at all. Is that what you want?

Yes.

Oh dear… I think that’s too much of a can of worms. I’d like to agree to differ on this point.

[Esuric]

@mickanomics

I’m only suggesting we attempt to reduce human error.

So in order to reduce human error (i.e., when people readjust their value scales based on previous experiences) we need the government to take money from the private sector (taxes) and setup some kind of consumer protection agency? And then we should trust that this government agency will not only do its job correctly, but that it won’t be controlled by special interests. So you’re saying:

1. People should not be allowed to make mistakes, because, at least in your mind, mistakes are bad.

2. The government should take from some in order to “help” others.

3. The government is good at helping others.

4. The government will not be captured by special interests.

I see many problems here..

[mickanomics]

@Esuric

@mickanomics

I’m only suggesting we attempt to reduce human error.

So in order to reduce human error (i.e., when people readjust their value scales based on previous experiences) we need the government to take money from the private sector (taxes) and setup some kind of consumer protection agency? And then we should trust that this government agency will not only do its job correctly, but that it won’t be controlled by special interests. So you’re saying:

1. People should not be allowed to make mistakes, because, at least in your mind, mistakes are bad.

2. The government should take from some in order to “help” others.

3. The government is good at helping others.

4. The government will not be captured by special interests.

I see many problems here..

You are exagerating my position.

1. I believe there to be an optimal (which is non zero) level of mistakes - mistakes are a form of “exploration” (see my very first post).

2. sure, yes.

3. They can be good, they can be bad. You have to be very clever to do government well.

4. it can happen, its a hazard we should strive to avoid.

You see many problems - agreed, so do I.

[MatthewF]

@mickanomics

Subject to the the insertion of the word “think” (see my previous post) I entirely agree, but I don’t see that this contradicts anything I have said does it?

Ok maybe I was talking past you. Here’s the rub:

The human condition is non-optimal. Humans act in order to move closer to their own personal “optimal.” Any system involving humans will be "non-optimal. There is no fix to this.

[Stolz25]

@mickanomics

You are exagerating my position.

1. I believe there to be an optimal (which is non zero) level of mistakes - mistakes are a form of “exploration” (see my very first post).

2. sure, yes.

3. They can be good, they can be bad. You have to be very clever to do government well.

4. it can happen, its a hazard we should strive to avoid.

You see many problems - agreed, so do I.

You do realize here that the cure is worse than the problem, even if it’s done perfectly? While a few people are going to get screwed (in your opinion) by the free market you are taking money from all (including the people perfectly capable of making rational decisions on their own) in order to help those few.

[Bostwick]

@GilesStratton

What are you even talking about?

I was tempted to ask you that same question, but thought I should take the time show you where you went wrong. Maybe I should have gone with my first instinct.

Your claim was that maybe some people want to be regulated, which would mean they want to not get what they want. If it doesn’t make sense, its because you presented a contradiction.

[Esuric]

@mickanomics

1. I believe there to be an optimal (which is non zero) level of mistakes - mistakes are a form of “exploration” (see my very first post).

2. sure, yes.

3. They can be good, they can be bad. You have to be very clever to do government well.

4. it can happen, its a hazard we should strive to avoid.

1. What is this so-called “optimum level?” And who are you to decide this “optimum level?”

2. Okay, good to see someone finally honest here.

3. When exactly is the government “good?” What’s your definition of “good?” You can’t be saying that the government is efficient, since there is nothing to back that claim up whatsoever.

4. How would we avoid this enormous problem?

There’s a lot of holes here; you need to elaborate.

[hayekianxyz]

@JonBostwick

Your claim was that maybe some people want to be regulated

Ermm, OK, but I never actually said anything of the sort (and how this even pertains to praxeology perplexes me, so how you can construe this as an attempt to “dispove praxeology” is beyond me). My point was that given Austrian methodology strictures, the subjectivity of utility in particular, you can’t say what is and what is not optimum without some sort of a value judgement.. Either you admit that an individual’s utility can’t be know to others and more importantly interpersonal comparison’s of utility are nonsensical, or you deny that. If you choose the former route that you can’t say the anything is preferable a priori on economic grounds, if you choose the latter you’re going to have to reject a great deal of Austrian theorizing.

[Knight_of_BAAWA]

@mickanomics

Now in my debate here on this forum several posters have claimed there is absolutely never any situation where a government could intervene to make a market better. I think they are wrong. If I try and give a mundane perfectly plausible example then the answer simply won’t be clear enough.

No, you simply won’t be able to give such an example. It is just not possible. Governments cannot make markets better; it is simply not in the nature of government.

[Bostwick]

@GilesStratton

My point was that given Austrian methodology strictures, the subjectivity of utility in particular, you can’t say what is and what is not optimum without some sort of a value judgement.

You’re far from my original point, which is that individuals know what they value and act to achieve it. Perhaps you are questioning the utility of letting people have what they value?

[Bostwick]

@mickanomics

Don’t forget that the time and effort spent making choices is also a cost. By allowing smoke and mirrors, confusion marketing and sneaky small print I have to spend more time choosing products. I personally found the process of choosing a mobile phone contract to be quite tortuous. Don’t forget the bad unintended consequences of the free market.

You’re getting more and more wrong.

Marketing is firms internalizing transaction costs. It is a market mechanism to disperse knowledge. Out of one side of your mouth you decry the market for lacking perfect knowledge and out of the other you call to make spreading information illegal.

The market doesn’t have unintended consequences. It doesn’t act, it is the sum of individual actors.

Of course, what you are proposing is to limit the choices of everyone in order make certain individuals happy( ie you). The market provides for all, government taxes some and subsidizes others.

[hayekianxyz]

@JonBostwick

You’re far from my original point, which is that individuals know what they value and act to achieve it.

That wasn’t your original point, and this is well understood. You said that it’s possible to tell a priori that free markets are desirable because individuals will thus be able to voluntary pursue the ends they most desire. My point was that you can’t say that this is good a priori because utility is subjective and therefore not apt for interpersonal comparison.

By the way, I like how you didn’t forget the “hey, you’re a statist” implication at the end there.

[Juan]

You said that it’s possible to tell a priori that free markets are desirable because individuals will thus be able to voluntary pursue the ends they most desire. My point was that you can’t say that this is good a priori because utility is subjective and therefore not apt for interpersonal comparison.

Your point is of course wrong.

[hayekianxyz]

@Juan

You said that it’s possible to tell a priori that free markets are desirable because individuals will thus be able to voluntary pursue the ends they most desire. My point was that you can’t say that this is good a priori because utility is subjective and therefore not apt for interpersonal comparison.

Your point is of course wrong.

No you’re wrong! (I can definately see this discussion going a long way in reaching the truth)